Russia and Ukraine – which were carved out of the defunct Soviet Union – have had a long history of conflicts. The current crisis between the duo started on February 24, 2022.
The key transmission channels of the crisis to the global economy and Nigeria include:
- Trade channel: The tensions have triggered global supply chain disruptions, largely affecting countries exposed to trade with the warring nations.
- Financial channel: Uncertainties will make investors seek safe-havens, and this could prompt capital outflows from emerging markets, including Nigeria.
- Commodity price channel: Constraints to supply due to the geopolitical tension have pushed up global commodity prices. This will generally fuel global inflation.
- Technology transfer channel: Nigeria has close economic ties with Russia. The crisis will hinder further procurement of expertise and equipment from Russia.
- Foreign policy channel: Nigeria’s alliance with Russia could suffer a setback due to fears that she might face sanctions from the West like those on Russia.
- Migration channel: The crisis has made millions flee Ukraine for neighbouring countries. About 4,000 Nigerians are currently studying in Ukrainian universities.
The key action points to mitigate the impact of the crisis on the Nigerian economy include:
- Removing the constraints to agricultural productivity to improve food security.
- Supporting value chain development to ensure that primary products are processed locally rather than exported in their raw state.
- Implementing the Petroleum Industry Act (PIA) in a holistic manner is key to attracting huge investments into Nigeria's oil and gas sector.
- Leveraging the benefits of the African Continental Free Trade Area agreement (AfCFTA) and ensuring effective border control.
- Removing capital controls and encouraging the inflow of stable investments, such as Foreign Direct Investment (FDI).